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Network Appliance Cuts Sales Guidance, Shares Plunge

Reuters
Thursday, 2 Aug 2007 | 5:55 PM ET

Network Appliance, a maker of data storage-network equipment, said on Thursday that quarterly revenue fell more than its previous pessimistic forecast amid slower spending by large customers in the United States and Europe, sending shares down 21%.

Network Appliance already had surprised investors on May 23 when it unexpectedly forecast a 6% to 7% drop in first-quarter revenue from the fourth fiscal quarter. It cited weaker spending by large corporate customers in the United States, driving down shares.

The company said revenue for the quarter ended July 27 fell 14% to 15%, to between $684 million and $688 million, amid "continued softness" in storage spending by large corporations in the United States and Europe. The results are preliminary.

"The critical question is whether the worst is behind the company or whether the outlook is still challenging," said Shebly Seyrafi, an analyst with Caris & Co.

"It's a question as to whether these factors are one-time in nature or if there is a fundamental slowing in growth rate at the company," Seyrafi said.

Network Appliance said first-quarter net income per share would be between 8 cents and 9 cents, and profit before certain items of 19 cents to 20 cents per share. The company reports final results on Aug. 15.

Analysts, on average, were forecasting net income per share of 14 cents and earnings before certain items of 17 cents per share and revenue of $750.8 million, according to Reuters Estimates.

It was not immediately clear whether the two estimates were comparable.

Shares of the company known as NetApp fell 21% to $22.75 in after-hours trading from a close of $28.71 on Nasdaq.

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